Dynamic Holdings Limited
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For the year ended 30 June 2021

CORPORATE GOVERNANCE PRACTICES

The board of directors (the "Board" or "Directors") and management of Dynamic Holdings Limited (the "Company") strive to establish and uphold good practices and procedures on corporate governance. The corporate governance principles of the Company emphasis an effective Board, prudent risk management and internal control systems, transparency and accountability to its stakeholders including shareholders, customers, suppliers, employees and the public.

During the year ended 30 June 2021, being the financial year under review, the Board and the management of the Company have been continually reviewing and enhancing the corporate governance practices of the Company with reference to local and international best practices from time to time. The Board believes that its continued efforts in enhancing the Company's corporate governance practices have contributed to sustain the business growth of the Company and its subsidiaries (the "Group") in the past years.

With an aim to safeguard the interests of the Company and its shareholders for the year ended 30 June 2021, the Company has applied the principles and adhered to the code provisions as set out in the Corporate Governance Code (the "CG Code") in Appendix 14 to the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") as amended from time to time, save for deviation of certain code provisions of the CG Code as disclosed below. Also, the Company has met some of the recommended best practices, where appropriate, in the CG Code.

The Company has also established an internal corporate governance code (compliance guide) (the "Internal CG Code"), the contents of which are in line with the CG Code as revised from time to time according to the relevant amendments to the Listing Rules. The Internal CG Code aims to facilitate compliance with the CG Code and to give guidance to Directors and the senior management of the Company in this respect. The Board will continue to monitor and review the corporate governance practices and procedures of the Company to ensure compliance with the CG Code and to enhance its practices and procedures.

DIRECTORS' SECURITIES TRANSACTIONS

The Company has adopted a code for securities transactions by Directors on the same terms as set out in Appendix 10 to the Listing Rules as amended from time to time (the "Model Code"). Having made specific enquiry of all Directors, each Director has confirmed to the Company that he/she has complied with the required standard set out in the Model Code throughout the year ended 30 June 2021.

BOARD OF DIRECTORS

Composition

The Board currently comprises seven Executive Directors (the "Executive Directors") and four Independent Non-executive Directors (the "Independent Non-executive Directors"). The members of the Board during the year ended 30 June 2021 and up to 29 September 2021 are as follows:

Current Directors:
Dr. TAN Lucio C. (Chairman and Executive Director)
Mr. CHIU Siu Hung, Allan (Chief Executive Officer and Executive Director)
Mrs. TAN Carmen K. (Executive Director)
Mr. PASCUAL Ramon Sy (Executive Director)
Mr. CHUA Joseph Tan (Executive Director)
Ms. TAN Vivienne Khao (Executive Director)
Ms. TAN Irene Khao
   (appointed on 14 September 2021)
(Executive Director)
Mr. CHONG Kim Chan, Kenneth (Independent Non-executive Director)
Mr. GO Patrick Lim (Independent Non-executive Director)
Mr. NGU Angel (Independent Non-executive Director)
Mr. MA Chiu Tak, Anthony (Independent Non-executive Director)
 
Ex-Directors:
Dr. FOK Kam Chu, John
   (resigned on 31 March 2021)
(Independent Non-executive Director)

Currently, the Company has four Independent Non-executive Directors representing more than one-third of the Board and more than one of them have appropriate professional qualifications or accounting or related financial management expertise.

Responsibilities and Accountabilities

The Board is responsible for establishing the overall strategic development and direction, setting business objectives and development plans, monitoring the performance of the business and senior management, and ensuring sound corporate governance of the Group. It also monitors the financial performance, the internal controls and risk management of the Group's business operations. Executive Directors are responsible for running and managing the operations of the Group and executing the strategies adopted by the Board.

The day-to-day operations of the Group are delegated to the management with departmental heads responsible for different aspects of the business and functions of the Group. The Independent Non-executive Directors serve the function of bringing independent judgment on the business development and performance, internal controls, corporate governance and risk management of the Group through their contributions in the meetings of the Board and committees of the Board.

The Directors can attend meetings in person or via other communications equipment in accordance with the bye-laws of the Company (the "Bye-laws"). The Board meets regularly with meeting dates scheduled in advance. Between scheduled meetings, senior management of the Group provides to Directors on a regular basis monthly updates and other information with respect to the performance, and business activities and development of the Group.

During the year ended 30 June 2021, the Company held a total of six Board meetings, four meetings of committees of the Board, and an annual general meeting. Details of Directors' attendance record of such Board meetings, committee meetings and general meeting during the year are as follows:

 
Number of Meetings Attended/Eligible to Attend
Name of Directors
Board
Audit
Committee
Remune-
ration
Committee
Nomination
Committee
Annual
General
Meeting
Dr. TAN Lucio C.
6/6
N/A
N/A
N/A
0/1
Mr. CHIU Siu Hung, Allan
6/6
N/A
N/A
N/A
1/1
Mrs. TAN Carmen K.
6/6
N/A
N/A
N/A
0/1
Mr. PASCUAL Ramon Sy
6/6
N/A
N/A
N/A
1/1
Mr. CHUA Joseph Tan
6/6
N/A
N/A
N/A
0/1
Ms. TAN Vivienne Khao
6/6
N/A
N/A
N/A
0/1
Mr. CHONG Kim Chan, Kenneth
6/6
2/2
1/1
1/1
1/1
Mr. GO Patrick Lim
6/6
2/2
N/A
1/1
0/1
Mr. NGU Angel
6/6
N/A
N/A
N/A
0/1
Mr. MA Chiu Tak, Anthony
6/6
N/A
1/1
N/A
0/1
Dr. FOK Kam Chu, John
   (resigned on 31 March 2021)
4/5
2/2
1/1
1/1
0/1

Training and Development

For training and continuing professional development of Directors, the Company provides relevant information and publications to all of the above-mentioned Directors on a regular basis to keep them abreast of the latest changes and development in the industry, legal, statutory and regulatory environment in which the Group conducts its business, and to refresh their knowledge and skills on the roles, functions and duties of a director of a listed company to ensure that the Directors' contribution to the Board remains informed and relevant. Directors have also from time to time been provided by the Company of in-house and on-line training and updates in the areas of regulatory, corporate governance, risk management, internal control practices and policy and sound industry practices.

In addition, all Directors are encouraged to attend external forums, training courses or webinars during COVID-19 pandemic on relevant topics for their continuous professional development. There are arrangements in place for Directors to obtain continuing professional development at the Company's expense whenever necessary.

The newly appointed Director, Ms. TAN Irene Khao, received induction on the first occasion of her appointment to ensure appropriate understanding of the business and operations of the Group and full awareness of Director's responsibilities and obligations under the Listing Rules and relevant statutory requirements.

In accordance with code provision A.6.5 of the CG Code on Directors' training and continuous professional development, all current and ex-Directors as stated above participated in the training activities described above during the year ended 30 June 2021. Each current Director has provided a record of training they received during the year to the Company.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The roles and responsibilities of the chairman (the "Chairman") and the chief executive officer (the "CEO") of the Company are segregated and separately undertaken by different officers to ensure a balance of power and authority. The Chairman provides leadership and is responsible for driving effective functioning of the Board in accordance with good corporate governance practice, and overseeing the Group's overall direction and strategic planning. The CEO is mainly responsible for implementing objectives, policies and strategies approved by the Board and managing the business and affairs of the Company.

NON-EXECUTIVE DIRECTORS

Currently, all Independent Non-executive Directors of the Company (the Company has currently no other non-executive Directors) are appointed for a term of two years subject to retirement by rotation in accordance with the Bye-laws. The Bye-laws stipulate that every Director will be subject to retirement by rotation at least once every three years at annual general meeting of the Company, and being eligible for re-election.

Meanwhile, all Independent Non-executive Directors have to confirm their respective independence annually pursuant to Rule 3.13 of the Listing Rules for their continuous appointment after reviewed and assessed by Nomination Committee. And those serving for more than 9 years, their further appointment should be subject to a separate resolutions to be approved by the shareholders of the Company (the "Shareholders"). The Company has received from each of the Independent Non-executive Directors an annual written confirmation of his independence and the Board considers that each Independent Non-executive Director meets the independence guidelines set out in Rule 3.13 of the Listing Rules and is independent.

BOARD COMMITTEE

The Board has established three committees, namely, the Remuneration Committee, Nomination Committee and Audit Committee for overseeing specific aspects of the affairs of the Group. Each committee is established with defined terms of reference, which are posted on the website of the Company.

Remuneration Committee

The Board has established a remuneration committee of the Board (the "Remuneration Committee") since 2005 with terms of reference, which meet the requirements set out in paragraph B.1.2 of the CG Code. The members and change in composition of the Remuneration Committee during the year ended 30 June 2021 and up to 29 September 2021 are as follows:

Mr. CHONG Kim Chan, Kenneth* (Independent Non-executive Director)
Mr. GO Patrick Lim
   (appointed as member on 31 March 2021)
(Independent Non-executive Director)
Mr. MA Chiu Tak, Anthony (Independent Non-executive Director)
Dr. FOK Kam Chu, John
   (ceased on 31 March 2021)
(Independent Non-executive Director)
* Chairman of Remuneration Committee

The Remuneration Committee is primarily responsible for reviewing, evaluating and/or recommending to the Board the Company's policy and structure for all remuneration of Directors and senior management; the establishment of a formal and transparent procedure for developing the policy of such remuneration; and the specific remuneration packages (if any) of individual Executive Directors and senior management.

During the year ended 30 June 2021 and up to 29 September 2021, a meeting was held and resolution in writing was passed by the Remuneration Committee for, amongst others, the following in accordance with its terms of reference:

  1. reviewed the emolument policy of the Directors of the Company and remuneration policy of the employees of the Group and the retirement benefit schemes of the Group;
  2. make recommendation of emolument policies of the Directors of the Company and employees of the Group;
  3. reviewed the share option schemes of the Company as incentive to Directors and eligible employees; and
  4. recommended to the Board the emolument of a newly appointed Executive Director, Ms. TAN Irene Khao.

Nomination Committee

The Board has established a nomination committee of the Board (the "Nomination Committee") since 2012 with terms of reference, which meet the requirements as set out in paragraph A.5.2 of the CG Code. The members and change in composition of the Nomination Committee during the year ended 30 June 2021 and up to 29 September 2021 are as follows:

Mr. GO Patrick Lim* (Independent Non-executive Director)
Mr. CHONG Kim Chan, Kenneth (Independent Non-executive Director)
Mr. MA Chiu Tak, Anthony
   (appointed as member on 31 March 2021)
(Independent Non-executive Director)
Dr. FOK Kam Chu, John
   (ceased on 31 March 2021)
(Independent Non-executive Director)
* Chairman of Nomination Committee

The principal duties of the Nomination Committee include reviewing the composition, structure, size and diversity of the Board; formulating and monitoring the policy for nomination of Directors; making recommendations to the Board on the appointment and succession planning of Directors and assessing the independence of Independent Non-executive Directors. Criteria adopted by the Nomination Committee in considering whether the relevant personnel are suitable as Directors include their qualifications, experience, expertise, skills and knowledge, ethnical, age, cultural background and so on in view of the provisions of the Listing Rules and the policy of diversity of the Board (the "Board Diversity Policy") as adopted by the Board, which summary is set forth below.

Board Diversity

The purpose of the Board Diversity Policy is to increase diversity at the level of the Board; to enhance the effectiveness of the Board and quality of its performance; and to support the attainment of strategic objectives/plan and sustainable and balanced development of the Company.

The optimum composition of the Board will be based on a range of diversity perspectives, including but not limited to regional, industry and professional experience, skills and knowledge, relevant length of services, gender, age, race, ethnicity, cultural and educational background and other qualities of Directors. The ultimate decision will be based on merit and contribution that the selected candidate(s) will bring to the Board.

The Nomination Committee will monitor and review the Board Diversity Policy and recommend any revisions thereof (if appropriate) to the Board.

For diversity of the members of the Board in terms of qualifications, skills and knowledge, age, ethnicity, relevant years of experience and expertise and relationships (including business, financial and family, if any) among them and between the Chairman and CEO (if any), please refer to the "Profile of Management" and the section on "Directors interests in competing business" in the "Directors' Report" on pages 15 to 18 and pages 32 to 43 respectively of the Annual Report 2020-2021.

During the year ended 30 June 2021 and up to 29 September 2021, a meeting was held by the Nomination Committee for, amongst others, the following in accordance with its terms of reference:

  1. reviewed the size, composition and structure and diversity of the Board, and assessed the balance of skills and experience of the Board as expedient with diversity of perspectives appropriate to the requirements of the business of the Group; and
  2. reviewed the independence of the Independent Non-executive Directors.

The members of the Nomination Committee also assessed and recommended to the Board the appointment of Ms. TAN Irene Khao as Executive Director of the Company; and reviewed the retirement and re-election of Directors for the year ended 30 June 2021 pursuant to resolutions in writing signed by all members in accordance with its terms of reference.

Audit Committee

The Board has established an audit committee of the Board (the "Audit Committee") since 1999 with terms of reference, which meet the requirements as set out in paragraph C.3.3 of the CG Code. During the year, the Board has delegated the functions of corporate governance to the Audit Committee with additional terms of reference as set out in paragraph D.3.1 of the CG Code. The members and change in composition of the audit committee during the year ended 30 June 2021 and as at 29 September 2021 are as follows:

Mr. CHONG Kim Chan, Kenneth* (Independent Non-executive Director)
Mr. GO Patrick Lim (Independent Non-executive Director)
Mr. MA Chiu Tak, Anthony
   (appointed as member on 31 March 2021)
(Independent Non-executive Director)
Dr. FOK Kam Chu, John
   (ceased on 31 March 2021)
(Independent Non-executive Director)
* Chairman of Audit Committee

The Audit Committee is primarily responsible for the following duties:

Relationship with the auditors

  1. to make recommendation to the Board on the appointment, re-appointment and removal of the external auditor;
  2. to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process in accordance with applicable standards;

Review of the financial information, financial reporting system, risk management and internal control systems

  1. to review and monitor integrity of financial statements of the Company and the annual report, half-year report and accounts of the Company and to review significant financial reporting judgments contained in them;
  2. to oversee the financial reporting system and review the risk management and internal control systems of the Group;

Relationship with employees

  1. to review arrangement for employees of the Group to raise concerns about possible improprieties of financial reporting, internal control or other matters; and

Corporate governance function

  1. to review and monitor corporate governance functions delegated by the Board.

During the year ended 30 June 2021 and up to 29 September 2021, two meetings were held and resolutions in writing were passed by the Audit Committee for, amongst others, the following in accordance with the terms of reference of the Audit Committee:

  1. recommended the re-appointment of the external auditor; and reviewed the financial reporting system and procedures of risks management and internal control systems of the Group; and the audited consolidated financial statements of the Group for the year ended 30 June 2021;
  2. approved the engagement of the external auditor for reviewing interim results; and reviewed the unaudited condensed consolidated financial statements of the Group for the six months ended 31 December 2020; and
  3. reviewed and monitored the policies and practices on corporate governance under D.3.1 of the CG Code, and compliance with legal and regulatory requirements as stated in corporate governance report of the Group for the year ended 30 June 2020 and as disclosed in the interim report for the six months ended 31 December 2020.

AUDITOR'S REMUNERATION

During the year ended 30 June 2021, audit and non-audit services were provided to the Group by Deloitte Touche Tohmatsu, the auditor of the Company (the "Auditor"). The total remuneration in respect of services provided by the Auditor amounted to approximately HK$1,671,000, of which approximately HK$1,365,000 was incurred for statutory audit and approximately HK$306,000 was incurred for non-audit services.

The Audit Committee is of the view that the Auditor's independence and objectivity will not be affected by the provision of the abovementioned limited scope of the non-audit services to the Group.

There was no disagreement between the Board and the Audit Committee on the selection, re-appointment, resignation or dismissal of its external auditor during the year under review.

DIRECTORS' AND AUDITOR'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The Directors acknowledge their responsibility for preparing the consolidated financial statements of the Group and have prepared the consolidated financial statements on a going concern basis in accordance with statutory requirements and applicable accounting standards.

The Auditor's statement of reporting responsibilities and report on material uncertainty (if any) of the Group are set out in the "Independent Auditor's Report" on pages 44 to 48 to the Annual Report 2020-2021.

RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

Risk is inherent in the Group's business and the markets in which it operates. To manage and monitor the various risk factors which the Company may be exposed, the Board is responsible for establishing and overseeing the Group's risk management and internal control systems on an ongoing basis, and ensuring the review of the effectiveness of the risk management and internal control systems has been properly conducted. The terms of reference of the Audit Committee has included its responsibility for an effective system of risk management and internal control. The main features of these systems, which continue to operate, were described in this "Corporate Governance Report".

For the year ended 30 June 2021, the Board and the Audit Committee have delegated the management to conduct and complete a review in respect of the effectiveness and adequacy of the risk management and internal control systems of business and operations of the Group. Such review conducts annually and covers all material controls including strategic and planning, financial, operational and compliance controls, and risk management functions.

The Group has also engaged internal audit function and no material control failure or significant areas of concern or fraud which might affect the interests of the Shareholders were identified during the reviews.

The risk management and internal control systems can provide reasonable and not absolute assurance against material misstatement or loss, and are designed to manage rather than eliminate the risk of failure in the process of attaining business objectives. The review of the effectiveness of the risk management and internal control systems for the year has been concluded and based on the results of the annual review, the Board considers them effective and adequate.

COMPANY SECRETARY

The company secretary of the Company (the "Company Secretary") is responsible for facilitating that Board's policy and procedures being followed with good information flow. In addition, the Company Secretary advises the Directors on governance matters and facilitates induction and professional development of Directors.

The appointment and removal of the Company Secretary is subject to Board's approval in accordance with the Bye-laws. All members of the Board have access to the advice and service of the Company Secretary. The Company Secretary, Ms. WONG Oi Yee, Polly is an employee of the Group and has complied with rule 3.29 of the Listing Rules for the year ended 30 June 2021.

SHAREHOLDERS' RIGHTS

The Company regards communication with its Shareholders and investors as an important means to enhance the transparency of the Group and regularly collects views and feedback from them, to safeguard the interests of its Shareholders and investors. To this end, the Company communicates with its Shareholders through various channels, including annual general meetings, special general meetings, annual reports, notices of general meetings, circulars sent to Shareholders, announcements, press releases and other corporate communications available on the website of the Company.

At the annual general meeting on 4 December 2020 (the "AGM"), the chairman of the Board was unable to attend the AGM due to travel restriction under COVID-19 pandemic. Meanwhile, management and external auditor of the Company together with the chairmen and/or members of the Board's committees attended the AGM to answer relevant questions raised by and understand the views of the Shareholders thereat. In respect of the year ended 30 June 2021, an annual general meeting of the Company will be held on 17 December 2021, at which the Company will arrange for the Chairmen of the Board and committees of the Board to attend and answer questions and proposals raised by the Shareholders thereat.

Shareholders, investors and the media can make enquiries or proposals to Board of the Company through the following means:

Telephone:   (852) 2881 5221
Fax: (852) 2881 5224
Post: 17th Floor
Eton Tower
8 Hysan Avenue
Causeway Bay
Hong Kong
Website: www.dynamic.hk
Email: info@dynamic-hk.com

By virtue of section 74 of the Companies Act 1981 (Bermuda) (as amended), the procedures for Shareholders to convene a special general meeting and to put forward proposals at general meetings are:

  1. The Directors, notwithstanding anything in the Bye-laws shall, on the requisition of member(s) of the Company holding at the date of the deposit of the requisition not less than one-tenth of the paid-up capital of the Company as at the date of the deposit carries the right of voting at general meetings of the Company, forthwith proceed duly to convene a special general meeting of the Company.
  2. The requisition must state the purposes of the meeting, and must be signed by the requisitionists and deposited at the registered office of the Company at Victoria Place, 5th Floor, 31 Victoria Street, Hamilton HM 10, Bermuda, and may consist of several documents in like form each signed by one or more requisitionists.
  3. If the Directors do not within twenty-one days from the date of the deposit of the requisition proceed duly to convene a meeting, the requisitionists, or any of them representing more than one half of the total voting rights of all of them, may themselves convene a meeting, but any meeting so convened shall not be held after the expiration of three months from the said date.

DIVIDEND POLICY

The Board has adopted a dividend policy (the "Dividend Policy") which is the policy of the Board for recommending and declaring dividends to allow the Shareholders to participate in the Company's profits, and to maintain adequate cash reserves for business operations, development and growth of the Group. The Dividend Policy is subject to review from time to time.

According to the Bye-laws, the Company in general meeting may declare dividend(s) but no dividend(s) shall exceed the amount recommended by the Board. And the Board may from time to time declare such interim dividends to the Shareholders as the Board thinks appropriate. In proposing any dividend payout, the Board shall take into account, inter alia, the actual and expected financial performance of the Group; retained earnings and distributable reserves of the Company and each of the members of the Group; the level of the debts to equity ratio, return on equity and the relevant financial covenants of the Group; any restrictions on payment of dividends that may be imposed by the lenders of the Group; the expected working capital requirements and future expansion plans of the Group; general economic conditions, business cycle of the Group's business and other internal or external factors that may have an impact on the business or financial performance and position of the Group; and any other factors that the Board deem appropriate.

INVESTOR RELATIONS

During the year ended 30 June 2021, there were no significant changes in the Company's constitutional document, namely, the memorandum of association and Bye-laws which are posted on the website of the Company.